Huishang Bank Rises Slightly in Hong Kong Debut

Shares of newly-public Chinese lender Huishang Bank Corp. edged higher in their first day of trade, although the stock’s gain paled in comparison to a separate technology listing, underscoring investor concerns about China’s banking system.

Huishang shares were recently trading 0.3% above their 3.53 Hong Kong dollar (US$0.46) offer price, a stark contrast to the 27% leap in shares of Chinese online game and app developer Boyaa Interactive International Ltd., which also went public Tuesday.

The bank sold almost half of its 2.61-billion share offering to cornerstone investors, which are usually guaranteed large allotments in initial public offerings in exchange for agreeing to hold the shares for a certain length of time. Huishang raised US$1.19 billion after pricing shares at the low end of a targeted range.

Traders said investor interest in the Huishang offering was muted. “These small and medium China banks are facing an uphill battle,” said Andrew Sullivan, director of sales trading at Kim Eng Securities in Hong Kong.

Banks both large and small on China’s mainland are grappling with rising bad loans after corporate lending surged in the years following the global financial crisis. The country’s smaller banks are also expected to bear a bigger burden in broad reforms that are expected in China’s banking system, such as the introduction of more competitive lending rates.

Shares in most Chinese banks are trading at or below book value, a sign that investors believe losses from bad loans will rise. Huishang shares priced at 0.94 times the bank’s expected book value this year.

Huishang Bank is the second Chinese lender to go public in the past week after a three-year drought of Chinese bank IPOs. Smaller Bank of Chongqing went public last week in a lackluster debut that’s seen its shares struggle to top their HK$6.00 offer price.